Stephani LeFlore, as Relator for the United States v. CVS Pharmacy, Inc.

May 14, 2011

CVS pays $17.5 Million to settle Medicaid Fraud

CVS, the giant retail pharmacy chain, has agreed to pay $17.5 Million to settle a whistleblower lawsuit accusing it of Medicaid fraud (“welfare fraud”).

THE FRAUD

According to her False Claims Acts lawsuit, CVS pharmacist Stephani LeFlore of Minnesota brought evidence to the government that CVS used a billing system for years that was designed to overbill Medicaid on prescription charges. Ms. LeFlore is represented by Minnesota attorneys Neil Thompson, Brian Wojtalewicz, Robert Christensen, and James VanderLinden, with local counsel Aaron Halstead of Madison, Wisconsin, where the case was filed in federal court.

It was done in relation to dual-eligible customers – those legitimately on Medicaid who also maintained their private health insurance coverage. The insurance coverages required CVS to charge the insurance company a smaller amount for prescriptions, and limited co-pay from the customer. When a person is allowed Medicaid coverage, the government always obtains an assignment of the person’s rights under their private health insurance coverage. The government essentially takes over the citizen’s rights under the coverage. This includes the common right to pay a smaller co-pay amount on prescriptions.

Ms. LeFlore claimed in her federal and state lawsuits that CVS should only have billed the Medicaid program the same limited co-pay on prescriptions that it would have normally billed the customer under the insurance plan. She alleged that CVS designed a billing software program for its pharmacies that consistently overcharged Medicaid on these co-pays. She claimed that these overcharges occurred on hundreds of thousands of prescription sales for well over five years.

The $17.5 Million settlement covers over-billings by CVS in the states of Minnesota, California, Massachusetts, Michigan, Florida, Indiana, Alabama, Nevada, New Hampshire and Rhode Island.

Ms. LeFlore first complained internally, but she was told by a supervisor that “corporate took care of the billing” and that she need not be concerned. She then retained her attorneys and commenced the False Claims Acts (qui tam) lawsuit in September, 2008. The lawsuit stayed under seal (non-public), according to the False Claims Acts and court orders, until the announcement of this settlement.

Ms. LeFlore and her attorneys will receive $2,595,460.00 as the reward under the federal and state False Claims Acts. They are also entitled to receive attorney fees from CVS.

STATE MEDICAID AGENCIES

Only CVS had the information necessary to reveal the correct, legal price established by the contracts of CVS with the insurance companies or related pharmacy benefit manager companies (PBMs). The states’ Medicaid agencies did not have this information. The Medicaid program is jointly financed by the Federal and State governments. It is administered by an agency in each state. Some state Medicaid agencies were aware of this wrongful billing potential, and directly addressed it in their rule making. Other states, particularly those states not included in the settlement, have missed the overbilling and are still paying it.

GOVERNMENT ATTORNEYS AND AGENTS

The government team on the investigation, negotiations and settlement was led by Leslie Herje, Assistant United States Attorney in Madison, Wisconsin, and Allie Pang, Trial Attorney in the Department of Justice, Civil Division, in Washington, D.C., with assistance from Nancy Mahoney, Assistant Attorney General in Massachusetts, and Elizabeth Valentine, Assistant Attorney General in Michigan.

Special Agents Jennifer Bowers and Gary Nelson of the federal Health and Human Services Office of Inspector General, and Joni Connell and Tom Gomach of the U.S. Attorney office in Madison, Wisconsin, provided good assistance to the lawyers for the government in the investigation.

CVS PHARMACY, INC.

CVS, the nation’s largest retail pharmacy giant, operates with over 7,100 stores across America.

THE FALSE CLAIMS ACT

The original federal False Claims Act was made law by Abraham Lincoln and the Civil War Congress, to enlist citizen whistleblowers in the fight against fraudulent war industry profiteers. It empowers citizens by giving them a reward, and substantial legal rights against retaliation by employers. In its present form, the government and whistleblowers can recover up to three times the amount of the fraud, plus substantial penalties and attorney fees. Whistleblowers (who are called “relators” under the law) may recover from 15% to 30% of the amounts collected from the frauding corporation. At least 29 states have passed their own similar false claims acts, and many other states are in the process. The government has recovered over $5.5 Billion against frauding corporations just since 2009. Medicaid and Medicare fraud, along with military contracting fraud, are the largest areas for recoveries, but ethical citizens have exposed fraud in the education, environmental and transportation fields, and in other areas of federal and state spending. The new state laws will help honest citizen whistleblowers and the government bring corporations cheating state taxpayers to account. More citizens are also using the newer IRS whistleblower reward law to bring tax cheating corporations to justice.

Neil P. Thompson is uniquely qualified to observe and analyze fraud in

the pharmaceutical industry, as a licensed attorney experienced with class

action litigation involving pharmacy pricing and the Federal and State

False Claims Acts, and a licensed pharmacist for 34 years, both as a

pharmacy owner and working for over 130 different chain pharmacy

locations.

Brian Wojtalewicz

Brian Wojtalewicz is the President-elect of the Minnesota Association for

Justice (formerly the Minnesota Trial Lawyers Association). For over a

decade he has been voted a Super Lawyer by his civil trial attorney peers

in Minnesota.

Robert P. Christensen

Robert P. Christensen, P.A. is the Plaintiff/Consumer member of the

International Society of Primerus Law Firms in the State of Minnesota.

He is currently the Dean-Elect of the Academy of Certified Trial Lawyers

of Minnesota and Member of. the American Board of Trial Advocates.

James G. VanderLinden

Jim VanderLinden has been an experienced and respected Minnesota trial

lawyer for decades. He is a member and past Dean of the Academy of

Certified Trial Lawyers of MN. He is also a member of the American

Board of Trial Advocates, an international organization of highly qualified

trial lawyers. He has been fighting corporate America for more than 3

decades.

Aaron Halstead

Aaron Halstead is the past Chair of the Wisconsin State Bar Association’s

labor & employment law section, with over 20 years of success in the

labor and employment law fields. He is also on the Board of Directors of

the Workers’ Rights Center in Madison, Wisconsin.

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